National Commentary

Obama Invokes the ‘American System’

The extremely stupid but likely so-called “sequestration” will apparently become the best that Congress can do next week, and despite devolution of the process into a “blame game,” there is little doubt who, in the eyes of anyone paying attention, is responsible. Once again, this travesty owes to the continued intransigence of a GOP gone stark-raving mad.

To the extent that any blame can be placed on the other end of Pennsylvania Avenue, at the White House, it may only be due to some lack of clarity about the core issues at stake.

The GOP and its masters have always posed a false dichotomy which has proven dissembling among most Democrats and bought lock-stock-and-barrel by the mainstream media. That false dichotomy limits the notion of governmental political and economic choices to spending more or spending less.

The substance of President Obama’s last two great oratories, his Second Inaugural Address and State of the Union address, embodied a different view, but not explicitly and aggressively enough.

For example, as the once-again-on-target commentator Fareid Zakaria noted last weekend, the president addressed national infrastructure needs, those 70,000 bridges ready to fall down due to lack of maintenance, but then pulled his punches big time.

In fact, infrastructure investment is the key to a genuine national economic recovery and a sustainably brighter future for the nation’s middle class. Zakaria cited the example of the Panama Canal.

So, the issue is not between spending more or less. It lies entirely in the arena of deciding what to spend on, and what not to. There are forms of government spending that are tantamount to national investments that establish the preconditions for enormous private sector economic growth. These forms of investment, that include education, need to be singled out, identified for what they are, and distinguished from other forms of non-growth producing, whether necessary or not, spending.

The role of the U.S. government as a pump primer for real long-term economic growth and prosperity goes back to the founding of the nation and has been integral to its emergence as a world economic power.

It began with Treasury Secretary Alexander Hamilton, including his famous “Report on Manufactures” and establishment of the first Bank of the United States.

It continued, after Hamilton’s assassination in a duel by British agent Aaron Burr, under the leadership of Henry Clay, the most important American politician never elected president. Clay, who started in politics as a brilliant and dashing young anti-Federalist, was against Hamilton’s bank at first, but changed his mind in the wake of the War of 1812, seeing its essential role to cover the debts incurred by the war and providing the seed money for a massive expansion of internal improvements as the young nation grew into its “western” lands like Ohio and Illinois. Thus, the “Second Bank of the United States” was formed.

It was Clay who, in 1824, first coined the term, “the American System,” to articulate the dirigist economic role of the U.S. government, which was not in contradiction to the private sector, but its complement. It was Clay’s enemy, Martin Van Buren, a New York banker in collusion with the British, who furiously opposed Clay’s plan for the nation’s first major tariff in that year.

Clay became known as the “Great Compromiser” for his tireless work to preserve the Union against efforts, beginning in 1832, at a British-backed secession by southern cotton-exporting states.

Clay died in 1853, before the efficacy of his efforts were fully demonstrated by the outbreak of the Civil War. He was the key instrument holding the nation together, just as Hamilton had been earlier as the principal author of the Federalist Papers in the 1780s aimed at ratifying the U.S. Constitution as essential for holding the young nation together.

The Hamilton-Clay legacy was carried forward by Abraham Lincoln, who learned his politics from Clay. Lincoln did more than preserve the Union by prosecuting the Civil War, he signed into law four new dirigist “American System” initiatives that were the precondition for the next 65 years of unprecedented growth: the greenback currency act, the railroad act, the homestead act, and the land grant college act.